Ap Economics: Chapter 3

Front 1

market

Back 1

an institution or mechanism that brings together buyers ("demanders") and sellers ("suppliers") of particular goods, services, or resources

Front 2

demand

Back 2

a schedule or a curve that shows the various amounts of a product that consumers are willing and able to purchase at each of a series of possible prices during a specified period of time

Front 3

law of demand

Back 3

there is an inverse relationship between price and quantitiy demanded

Front 4

diminishing marginal utility

Back 4

successive units of a particular product yield less and less marginal utility

Front 5

income effect

Back 5

a lower price increases the purchasing power of a buyer's money income, enabling the buyer to purchase more of the product than she or he could buy before, a higher price has the opposite effect

Front 6

substitution effect

Back 6

at a lower price buyers have the incentive to substitute what is now a less expensive product for similar products that are now relatively more expensive ("a better deal")

Front 7

determinants of demand

Back 7

factors that affect purchases such as consumers' tastes, number of consumers, consumers' incomes, the prices of related goods, consumer expectations about future prices and incomes

Front 8

normal(superior) goods

Back 8

products whose demand varies directly with money income

Front 9

inferior goods

Back 9

goods whose demand varies inversely with money income

Front 10

substitute good

Back 10

one that can be used in place of another good

Front 11

complementary good

Back 11

one that is used together with another good

Front 12

change in demand

Back 12

shift of the entire demand curve

Front 13

change in quantity demanded

Back 13

a movement from one point to another point on a fixed demand curve

Front 14

supply

Back 14

a schedule or curve showing the amounts of a product that producers are willing and able to make available for sale at each of a series of possible prices during a specific period

Front 15

law of supply

Back 15

there is a direct relationship between price and quantity supplied

Front 16

determinants of supply

Back 16

resource prices, technology, taxes and subsidies, prices of other goods, price expectations, the number of sellers

Front 17

change in supply

Back 17

shift in the entire supply curve

Front 18

change in quantity supplied

Back 18

a movement from one point to another on a fixed supply curve

Front 19

surplus

Back 19

excess supply

Front 20

shortage

Back 20

excess demand

Front 21

equilibrium price

Back 21

no shortage and no surplus so price is at rest

Front 22

equilibrium quantity

Back 22

quantity supplied and quantity demanded are in balance

Front 23

rationing function of prices

Back 23

the ability of the competitive forces of supply and demand to establish a price at which selling and buying decisions are consistent